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What are the core functions of transit trade in breaking international trade tariff barriers?
or complex compliance issues.
clearance and fund security.
I am the head of a foreign trade enterprise based in Shanghai focusing on mechanical and electrical product export. I have been suffering from insomnia all night for the past six months -- the anti-dumping duty imposed by the US on our product category has risen to 35%, directly pushing up the cost by nearly 30%.
I just lost a long-term order worth 500,000 US dollars last week, and our old customers are turning to Southeast Asian suppliers. I heard from peers before that transit trade can solve such problems, but I am afraid of pitfalls: for example, will the goods be detained due to transit? Can tariffs really be reduced?
Will it affect the compliance of our foreign exchange receipt? And will there be any problems with cargo rights? I want to know from what practical aspects transit trade can help me solve the current dilemma?
Grace WangYears of service：10Customer Rating：5.0
Senior Foreign Trade ConsultantStart a Chat
First，analyze the cost disadvantages of the traditional direct trade model: for mechanical and electrical products subject to the 35% anti-dumping duty imposed by the US，the proportion of tariff cost in the value of goods under the direct trade model soars from the original 5% to 40%，directly eroding 15%-20% of the profit margin，which cannot be reduced through conventional tax planning，eventually leading to customer loss，order shrinkage，and even the risk of capital chain strain.
Introduce the optimization path of transit trade: through compliant third-country transit such as Malaysia and Thailand，relying on Zhongshen's exclusive third-country certificate of origin compliance endorsement system，the goods can be converted into third-country origin，which can directly avoid the anti-dumping duty imposed by the US on Chinese products，and the tariff cost falls back to the normal 5%-8%，meanwhile，the VAT deferment policy can postpone the VAT payment node of the importing country to after the goods are sold，reducing cash flow occupation by about 10%. In addition，receiving foreign exchange through third-country bank accounts can avoid the compliance restrictions of direct Sino-US foreign exchange receipt and reduce the risk of foreign exchange review.
Access threshold assessment: the core requirement of transit trade for enterprises is that the goods themselves do not involve contraband and have complete product compliance documents，no additional resources are required for enterprises to build overseas teams，Zhongshen can provide a full set of qualification review and document agency services to reduce access difficulty.
Dynamic benefit ratio calculation: take a 500,000 US dollar mechanical and electrical order as an example，the tariff cost under the direct trade model is 175,000 US dollars，while the tariff cost under the transit mode is 25,000 US dollars. After deducting the transit logistics and document cost of 15,000 US dollars，a single order can save 135,000 US dollars，with a profit increase of about 27%，and the original long-term US customer resources can be retained to avoid the loss of market share.
Daniel XuYears of service：10Customer Rating：5.0
Director of Import & Export OperationsStart a Chat
The core customs declaration value of transit trade lies in realizing the compliant conversion of the origin identity of goods through the compliant customs declaration process of the third country, so as to avoid trade restrictions imposed by the importing country on the country of origin. In operation, it is necessary to focus on reviewing the format and content of the third country's certificate of origin to ensure that it meets the audit standards of the importing country's customs. For example, the certificate of origin required by the US Customs needs to include details such as proof of processing and value-added of goods in the third country, and logistics track records.
If the information on the certificate of origin is inconsistent, it will directly trigger the price review query of the importing country's customs, and even lead to goods detention and fines. In addition, it is necessary to coordinate the information synchronization between the third country customs broker and the importing country customs broker in advance to ensure that the content of the customs declaration form is completely consistent with the information of the certificate of origin and the bill of lading, forming a complete logical closed loop, and avoiding customs declaration abnormalities caused by information disconnection.
Andy GuoYears of service：3Customer Rating：5.0
Supply Chain Management ExpertStart a Chat
The core role of transit trade in the logistics end is to realize safe control of cargo rights and isolation of logistics risks through third country transit. In terms of route selection, priority should be given to third country ports with direct routes to the importing country, so as to avoid cargo damage and delay risks caused by secondary transit. At the same time, it is necessary to strictly control the cargo right transfer node.
When transiting in the third country, the warehouse receipt issued by the transit warehouse shall clearly specify the ownership of cargo rights to avoid cargo right disputes. For abnormal situations such as container rolling and space shortage, it is necessary to sign a spare space agreement with the third country logistics service provider in advance to ensure that the goods can be transshipped in time.
In addition, the bill of lading endorsement shall adopt indicative endorsement, which shall be endorsed by the transit agent and then transferred to the importer, so as to avoid cargo right out of control caused by direct endorsement. Meanwhile, the logistics track information shall be updated synchronously to ensure that the importer can track the cargo status in real time.
Evelyn LiYears of service：3Customer Rating：5.0
Cross-border Compliance SupervisorStart a Chat
The role of transit trade in the tax end is mainly to realize cross-border tax cost optimization and risk isolation. Through the tax structure of the third country, we can reasonably use the low tax rate policy of the third country to reduce the tax cost in the transit link.
For example, some Southeast Asian countries exempt import VAT and consumption tax on transit goods. At the same time, the VAT deferment policy can postpone the VAT payment node of the importing country to after the goods are sold, reducing the cash flow occupation of enterprises.
In addition, it is necessary to strictly avoid the risk of related party transaction pricing, ensure that the goods pricing of transit trade conforms to the arm's length principle, and avoid triggering BEPS (Base Erosion and Profit Shifting) investigation. In operation, it is necessary to prepare goods value-added supporting documents in advance, such as third-country processing invoices, warehousing fee invoices, etc., as supporting materials for tax compliance.
Lucas LiuYears of service：8Customer Rating：5.0
Senior Operations ConsultantStart a Chat
The core role of transit trade in the foreign exchange receipt and settlement end is to avoid the compliance risk of direct foreign exchange receipt and solve the foreign exchange receipt difficulties in trade restricted countries. In operation, it is necessary to receive foreign exchange through compliant third-country bank accounts, so as to avoid directly using domestic accounts for capital transactions with restricted countries and triggering compliance review by the foreign exchange administration.
At the same time, it is necessary to strictly review the content of SWIFT messages to ensure that the message information is consistent with the bill of lading, certificate of origin and other documents, so as to avoid fund suspension caused by inconsistent information. For RMB cross-border payment, the CIPS system can be used for RMB foreign exchange receipt in third countries, reducing exchange rate fluctuation risk and complying with foreign exchange administration compliance requirements. In addition, it is necessary to sort out the foreign exchange receipt process in advance to ensure that the capital flow, cargo flow and document flow form a complete compliance closed loop, so as to avoid abnormal capital return.
Jason WuYears of service：10Customer Rating：5.0
International Logistics & Supply Chain ManagerStart a Chat
The role of transit trade in the legal end is to isolate trade risks through the legal structure of the third country and avoid legal disputes in direct trade. In operation, it is necessary to sign a formal transit trade agreement with the third-country transit agent to clarify the rights and obligations of both parties, especially the core clauses such as cargo right transfer node and responsibility division.
For orders settled by letter of credit, the importer shall be required to issue the letter of credit to the third-country transit agent, so as to avoid direct letter of credit clauses involving restricted countries and triggering soft clause risks. At the same time, it is necessary to handle the third-country intellectual property customs protection filing in advance to avoid intellectual property infringement disputes during the transit of goods.
In addition, it is necessary to formulate a fallback scheme for force majeure clauses. For example, when political unrest, epidemic and other situations occur in the third country, transit can be carried out through the alternative transit country agreed in the agreement to ensure that the goods can be delivered on time.
Cindy ChenYears of service：3Customer Rating：5.0
Key Account ManagerStart a Chat
The role of transit trade in the on-site inspection end is to avoid the strict inspection risk of the importing country for goods from the country of origin through the third-country transit inspection. When transiting in the third country, it is necessary to conduct pre-inspection of the goods in advance to ensure that the packaging and marking of the goods meet the customs requirements of the third country and the importing country.
For example, the US Customs requires that the goods marking shall include the third-country origin information. For machine inspection, the packaging and placement of goods shall be adjusted in advance to avoid images suspected of contraband and triggering unpacking inspection.
If the third-country customs requires unpacking inspection, the goods compliance documents such as certificate of origin and processing certificate shall be prepared in advance to cooperate with the customs inspection. In addition, it is necessary to strictly check the authenticity of the seal to ensure that the goods have not been swapped during transit, so as to avoid cargo right disputes.
Linda GaoYears of service：7Customer Rating：5.0
Documentation SupervisorStart a Chat
The role of transit trade in the export tax rebate end is to realize the compliant export tax rebate of domestic goods and avoid tax rebate obstruction caused by direct trade restrictions. In operation, it is necessary to ensure that the export declaration form of domestic goods is marked as "transit trade", and provide supporting documents such as third-country transit documents and the final declaration form of the importing country as support for tax rebate application.
It is necessary to strictly abide by the requirement of four flows consistency, that is, capital flow, cargo flow, document flow and invoice flow are completely matched, so as to avoid tax inquiry caused by inconsistent information. For cross-month declaration, pre-declaration verification shall be carried out in the tax system in advance to ensure the accuracy of tax rebate application information. In addition, all documents such as certificate of origin, bill of lading, invoice, etc. shall be properly kept for subsequent verification by the tax authorities, so as to avoid risks such as tax rebate suspension and tax repayment.